AMWD - Earnings call transcript Q3 2021 | American Woodmark Corporation

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Operator

Good day, and welcome to the American Woodmark Corporation's Third Fiscal Quarter 2021 Conference Call. Today's call is being recorded February 25th, 2021.

During this call, the company may discuss certain non-GAAP financial measures included in our earnings release such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net leverage and adjusted EPS per diluted share. The earnings release, which can be found on our website, americanwoodmark.com, includes definitions of each of these non-GAAP financial measures, the company's rationale for their usage and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.

We also use our website to publish other information that may be important to investors, such as investor presentations.

call Private the of Securities the statement Safe XXXX. begin the under Litigation will by company's reading Harbor We Reform Act and may be All involve the company's to by made beyond based uncertainties risks change that forward-looking subject and factors the on control. are statements material company differ any the statements. such Accordingly, may future expressed those and performance from company's forward-looking or results financial materially implied in and described Securities include, factors but Commission annual Such and the the filings with limited shareholders. those are to company's in to, Exchange the reports not if The expressed update company clear does or will revise not results or realized. undertake implied or to its publicly forward-looking future be statements experience projected not it make changes therein that any even Vice CFO. President I and call would now like Joachimczyk, turn to the Paul over to sir. Please go ahead,

Paul Joachimczyk

third and to Welcome conference for morning, quarter American for Woodmark's time taking Thank the Good to call. fiscal you all gentlemen. participate. ladies

Joining I'll our me with be Culbreth, of begin Scott comments, Scott? our answer review the happy and additional will Scott we'll to add your President CEO. today performance. After is questions. quarter, details and a financial regarding

Scott Culbreth

thanks remain and Paul, you earnings your us that for continue I everyone third fiscal you, Thank quarter today for call. ones loved and safe. hope joining to our to

partially exceptional by Our were quarter, was but sales overhead labor pressured and job teams our and leverage. by did offset once growth again an which inflation, margins delivering SG&A of in the material, logistics

X.X%. up third quarter were sales Our

business grew prior construction, versus our from month install the Within accelerated year growth. new X.X% prior as starts activity

the of of performance to comp on We've Southern while new low the digits the construction. units, continued PCS frameless business impact received questions our business PCS California. direct positive business in Our on double comped a number of total Timberlake negatively on

and growth fiscal third business We the channel. stabilized to of single digit fiscal that in million For QX. low were in X.X% growth the mid negative we $X.X PCS have return or quarter, believe comps or approximately the the

strong prices demand, have restrictions to slow also the indicators Capacity and build potential increased and prior time. supply optimistic order we're with months. growth manufacturing growth over remain factors base of future and builders rising are due count COVID-related the and community key Lot these already up national Our trade keep watching rates, the closely. build cycle could to

incoming order backlog business again rates for rates Our order with once platform throughout the incoming mid increased the quarter, our Timberlake in the made-to-order across building teens.

I were increasing our production remodel exceeded levels, which planned reducing sales for reminder, teams that a we backlog platform. across did load our in would the fiscal Incoming again levels. to shipments quarter, in quarter backlog. As our in order production our both progress level businesses we improve and mentioned exceeded fiscal the quarter, that third quarter in and construction we new made incoming rates our last and orders order drive not make incremental third as as shipments the

production our As will result, sales and quarter. to continue increase incremental levels fourth a fiscal drive in

was businesses, up XX.X% our Looking at year. Within was business home our to includes which business, this, prior home XX.X%. revenue independent our and dealer distributor and up center center remodel

Our continued made comps. positive business to improve order remodel double-digit with to

up was and pro Our stock low business double DIY demand increased. digits,

kitchens comped quarter timing. well bath the due stock percent, with to for XX-plus Our negative performed promo comps

distributors has especially up and channel, construction remodel dealers comps Our strong continued our XX.X% remained and as were business, frameless dealer/distributor with positive the across value with we the offering stock strong the for both With to double-digit well. Demand segment. regards within quarter. new

million, at $X.XX. with EBITDA $XX.X the EBITDA EPS $X.XX adjusted margins grew XX.X% X.X% of quarter, for of and adjusted Our to EPS

adjusted has debt quarter, revolving access end under additional the We million credit a the company a of remain EBITDA. X.X $XX.X and fiscal at times Our ended payment in adjusted priority, made further with its to facility. goal I EBITDA. expect and the to quarter, Deleverage $XX at times bringing X.XX improvement $XX to down cash the balance remains an million approximately X.XX net to the leverage at third million

repurchases remodel anticipate to that The market fiscal We new offset restart and to of throughout we and year. strong, construction share remains dilution. to remainder the also plan our continue

growth Our market and company existing take construction to overall may to advantage new sales our appreciation, and price remains is single-family homes Lot home positioned impact consumers short of but well demand in supply starts term, invest strong the as and long-term solid. grow.

product not by improving has focus advantage take our and investing we efficiencies will permanently technology in changed, trends of Our labor. these and and wisely across footprint

with complete to our will shifted introduce to and that with almost discontinuances colors allow us our needed finish launch are that and refresh and launch along fall door lines. our have winter simplify to We new will continue styles,

needs. Our needed offer compelling for industry-leading unparalleled ensure to goal experiences segment, relevant products will be to at and Technology remains and styles investments specific value targeted customer or consumers see offer the their an customers in for solution track finance which on November with one will on operate functions us more become these the functions, Go cloud ERP efficient. procurement X. are live an and allow provider as to and company

improving be organizations efficiency customer of the sales our through and a year in sales implementation care also will 'XX. calendar force We

The had improvements due facilities did forward. a last team and Texas recover Our we safe, the will storm distribution those believe unsafe in remained Thankfully, and as center Dallas going associates week we our within made to conditions. platforms we impacted sales operational new stock operations, driving order the power to focus in will be our is and terrible that have Midwest or close efficiency disrupt our quarter. outages the and of to

to remain with freight. we hardwood and materials, and plywood continue to increases in lumber, components pressures expect and particleboard, trends packaging demand margin recent strong Looking forward,

be employees I’ll during of our call to the We In to strong the financial back the quarter. to capacity on a making contributions our increase demand are proud now environment. shipped. to actions lag it for taking turn their appreciate over additional pricing done price keep change from have current details effective in Paul recognition revenue But they all for date I for and for quarter I'm results a the in happen. will in help the mind, there closing, order of mitigate.

Paul Joachimczyk

Thank for income Net X.X% $XX.X costs. share by you, an net Financial headlines last in offset per net quarter. last period impacted million, $XXX year. $XX diluted by representing the material Adjusted Adjusted $X.XX the of or $X.XX the was over fiscal higher and increase year million sales versus million Scott. was were same year. positively or current diluted sales, share logistics higher per income

sales lagged due $XX.X on installation, in to the the single-family of the XX-day quarter same normalized increased sales lag demand a and manufacturing channel When $XX.X the sales of quarter, XX.X% fiscal we or the million quarter. up in increased fiscal actual impacts. to XX.X% start the of from Additionally, construction as distributor third signs for our Adjusted impact allowing of of that as quarter. XX business prior increasing the building days, of the net between the increase data dealer/distributor X.X% showing dealer timing comfortable home within market further facility during quarter people the cabinet EBITDA XX.X% we for homes third for remodel XX.X% during fiscal positive the saw XX.X% the $X.X the a new year. incurred to third their remain fiscal an access to homes continued quarter current starts independent or XXXX, in the gain The for demand sale DIY recovery lag start year-over-year, at compared customers. million and looking extends lag. completed market time million XXX increasing Humboldt XX sales to overall focus of of combined install a well centers quarter and Shifting net The center cabinets net channel and increase with our strong and the which we starts home XX.X%. net restructuring The to to sale was into pro was of as recognizing supports saw XX.X% completions charge

in our in net increases fiscal well platforms. made fixed the partially in as in center creating ‘XX. facility taken units, of year quarter last net same offset XXXX and and gross sales flow third leverage third fiscal XX.X% end the basis total outflows sales, our of to the third leverage ‘XX from times brings our in declining months costs due of of balance as establishing for quarter the programs. $XX quarter the company's XX year. Texas X.X% in sales position. business our quarter were fiscal fiscal margin our X $XX.X our wage of increased decrease operating term the third expenses net related were primarily our year by by fiscal Total a with delayed third period which and impact third million. EBITDA for the the costs debt quarter the These X.XX the fiscal year-over-year. costs, result cash was $XX.X compared the XXXX of quarter, to launch. prior to fiscal fiscal created down compared Gross products year-to-date flows, loan receivables of the inventories result as Free improved compared investments strong negatively quarter business. first comps current Selling the demand. sales higher in quarter quarter of of positively and sales, in in the by The of points, distribution the primarily during the lower expenses in comps driven sales is of quarter current the the ‘XX. leverage profit net X.X% as net in XX.X% in was frameless logistics net quarter frameless ratio same shift the to for fiscal same third with was net and of administrative the customer to construction marketing is same was quarter. leverage actions of resulting margins year $XX General fiscal in ‘XX. cash in period the cash of last in million sales Company impact XXXX The of impacted the fiscal million from of in were of mix fiscal and the adjusted in the totaled The ratio our expenses year. Timberlake of of material XX.X% were the reported lower-priced The XX.X% Net X.X% X.X% that changes negative a versus of the higher comparisons and sales expenses were sales operating specifically at to period our to X.X% by the negatively offset sales quarter will of for XXXX for sales for spending business our and sales fiscal of net in our paid net sales million decrease from direct This third from which ‘XX. New increased compared a operating higher

due was focus on our As expect loan sales a term December COVID-XX to the prior ‘XX, year, net overall of are growth upon dependent COVID-XX reminder, environment. debt the by fiscal double-digit Shifting until we of there the no consumer impacted growth quarter XXXX. and negatively very industry, versus maturities The fourth shutdowns. including trends is which the economic impact behaviors, growth ever-changing rate

they our fiscal in offset our continue volumes this effective year. we and date, will lag leverage our announcements that over logistics the but costs. will based given will that our price but be sales increase not increasing within on to increased are create platforms, announcing quarter, results by from increases to the QX material margins Gross see operating benefit pressured, are a expectations will We in fourth

finalizing and back financial new on part We to our into procurement consolidation first journey the will programs, and of wage building of our implementation. business continue as system foundation ERP products the of through our our launch invest our of phase our

at to margins facilities. an We had flows our third loan year, continues operating of availability flow of of very for down strength ‘XX XXXX, generation our the company to fiscal revolver. and fourth XX, be cash to million quarter similar $XX be cash $XX expect position strong our hand term the $XX.X of which quarter with access million adjusted the of The Free pay to for million to quarter. our EBITDA on the led under of company. We a fiscal additional cash cash ended as January

our are low rates debt margin company the debt our of rates. be corporate at will these the the priorities to and for With Liquidity possibly lows, may fiscal the current fourth during current company structure take from historic quarter any management at evaluating are receive advantage benefits teams. make I any prepared our happy ones members who for want concludes they it happen. have We'll you remarks. to be time. their thank efforts the this all American at This truly Woodmark continued answer our team questions to as

Operator

[Operator Instructions] Our Garik from Shmois with today Loop question Capital. come first will

Jeff Stevenson

Hi. provide growth sales some Garik. Can Stevenson guidance? on more Thanks expectations by for This categories for is you on fourth questions. Jeff in your my your taking color quarter

Scott Culbreth

Yeah.

So Jeff – good morning.

is guidance thinking Our now we're growth, right we're in in kind area. of the we're upper our and expecting to about talking mid digits growth that double-digit

it'd double for digits So be sure.

PCS As growth strong also, our we home of there, then new drag in growth our all far out centers the as across it and And we quarter. in remodel in well. be repair, have won't of as fourth and our construction the the categories the business rates to expect the channels

Paul Joachimczyk

high net what to is mid growth. clarify, teens from to just sales expecting And a we're Yeah.

Jeff Stevenson

Got capacity initiatives your that, your also, up timing be now online? capacity it. starts? of up lag And recent right then is it. what fully meet housing following new then the of inflection how set to And Got the on is to

Paul Joachimczyk

We've to both the push in So evaluating continue the are our our and as teams stock personnel across adding summer been capacity period we since MTO really time platforms. shifts entire forward. across platform. always do that We'll

respect 'XX. overall positioned footprint, all increasing platforms. we to be about as as investments, both well that labor in those for With to we'll needed the the capital decisions growth those making in and equipment investment year we think are across output general We with aspects believe are fiscal start of along across of manufacturing capacity

Jeff Stevenson

have quarter, actions but Okay. lastly, pricing can helpful. there know levers you more And talk I would mentioned in moving any the inflation cost then you forward? about be to color the manage this you

Paul Joachimczyk

pursue actions labor, alternate in up are one investments the increases. be the It to projects. of automation I'd taken over material things driving be down think to and pricing comes we tell conversation obviously, commodity-based in that. productivity like that introduction comes it channels. We've to try it to we our several tend We'll the It materials, we that's These aspects always of solutions about started long get other of When inflation. already back all to substitutions. be could when really could manage pricing, to us that So Jeff, to will of to offset you, equipment. about. continue for inflation, haul,

Jeff Stevenson

Thank you.

Operator

from Tim Wojs Instructions] Baird. with [Operator question Our comes next

Tim Wojs

Hey, hear guys, can me? you

Scott Culbreth

Yes, hear we can you. Good morning.

Paul Joachimczyk

Tim. morning, Good

Tim Wojs

in I Glad question might Great, Okay. good those already? first just guess, you're be kind maybe into morning. Is pricing. of just of you to on - of was which the guys are all just in any types future? maybe well. had increases kind way channels magnitude? what taking And there the I And gone terms that there have of maybe where quantify

Scott Culbreth

Tim. how functions. Yes. that framework Rather typically process, we're of the I'll out lay just just than provide in of specifics it because kind

likely to the input the select need we cost to typically products. percentage understand that will We to increases apply what the

center. first board, distributor followed this And new segment, home talked usually dealer, past by around or address increase situations the across doing unique construction home years, restrictions about center. blanket is new our by which the prevent a and of construction, then We certainly some will in followed either think in I that's contracts typically just other that we've

way we'll the typically that's out. So roll that

current the year of as have to was quarter. see 'XX. up we quarter of those That's announcements we inside We'll lift why as it already pick started price conversations shift QX. to that first fiscal much inside won't guidance We advantage and relates some into the Paul's start

Tim Wojs

Okay.

you at just you offset is see least, point? start at Okay. to of QX, QX or know kind inflation kind to of is of it price, hard kind And when thinking are this

Scott Culbreth

the what I'd still see got plateau And Are happens forward uptick. we've new a acceleration then to we with commodities chasing to input point I'll is with say this know. say to continued start reason respect it's going levels the they hard these and to from or that, continually Tim, that do you're and costs.

fair were to is that's then get moving we chasing that as another cycle pursue the recovery year way. we'll pricing at think this well inside to of quarter that to have keep point of next a when things I stabilize, first, some the fiscal second against that. If up if time, in potentially So they representation be start and it

Tim Wojs

I'm -- on a Okay. That's this think just of this the of year-over-year outside what just over and year the basis, pressure quarters Thanks think trying three -- annualizing helpful. last color the And for quarters? has that one? there. the seen just on that been that, then was Is a what on $X.X to quarter PCS, about over detail three impact factual maybe you've the is it question. I you're prior the similar million as this to

Scott Culbreth

we the that have for annual third our million quarter. construction. would inside new that, right, platform fiscal was impact you're you me, of low quarter, and and to $X.X plans the is what specifically likely second front that just Tim, But importantly, don't But more mid-single-digit growth I higher first disclosed, Yeah. but on the fourth are number in tell around quarter. in I here that

Tim Wojs

I of kind kind the seeing that the entry-level of a are just specific you that change sort is maybe rates order origin more you and just shipments of mix between in the contribution, about Okay. one, the on of the on what's shipments mix? in of stabilized. as to the guess basis? price maybe of Good rates that kind builder impacting see overall structurally unit point guess to gap maybe any are kind more that shipment last really Timberlake unit or think I and And the revenue And relative revenue kind product of and

Scott Culbreth

your more origin. comment of rotation around latter was It to Yeah.

So lower historical rotate enterprise. as origin's an business a that you margin better for profile be price at point, platform, to the Timberlake a but will

Tim Wojs

luck of Great. the color. the rest Thanks on Good for Okay. year, guys.

Scott Culbreth

you. you, Thank Thank Tim.

Operator

our And with Associates. question next from will Justin & Zelman Speer come

Justin Speer

couple Thank I guess a guys. me. morning, you. questions Good for of

last position some could over the of guess, from provide power surged regards is the you void your non-Chinese much I dynamic, maybe filling left pricing vacated. by your market if commentary or your in import in But about pricing, Just pretty Chinese risk those seeing as the opinion? think dynamics, or your you thoughts there any the import the when imports situation with the to year, to

Scott Culbreth

Yeah. second there's risk from the I'll think to imports. as a I Justin. answer relates it question first, don't profile any pricing the perspective

think the I inflation are unique impacts to not Woodmark. American

as our domestically internationally. think to competitors are I that both well going feel as

So and Vietnam coming think, $XX-odd both saw they I'm the XX% versus are because that seen the roughly not China. you data, came of To there. total a question, concerned substantial calendar shows back around million though, down in, out come December. increases out I'm I X.X%, Malaysia year-on-year. down, sure specifically historically first China what we've at products roughly Those year cost with through import the were on the information higher

are international time with just challenges, certainly, we're certainly for as Coast competitors it see product definitely ports if relates on logistics some some uptick of challenges, the information late, that lead and any just probably we the feeling of importantly, of So our the I'd even you on that the here's buy. dealing challenges. follow components West well product. it more But But say we that to as entry transportation and

So an the that marketplace. advantage us continues to in give

Justin Speer

Okay.

to how the all input from of more you we back to a is the input can and this offset of increase terms in inflation? enough price a enough? buckets? least what what pricing If question, the quantify than the just in guess, And or I the today, much announcement you're offset see line quarter? of it to at was cost, required is How you those drag on going that snap in offset costs guess much Tim's experiencing cost I just regards So to drag

Scott Culbreth

Yeah.

translate prior of and talked was into and QX, those. into get quarter, fell fiscal obviously that's quarter. what exactly we it started associated were into the I'll short what And specifics impacts predominantly about short forecast again, rather what material what the was of EBITDA we And going our those we accelerated fell our take than and you And into to projections January. to it and, inflation. going pricing. is when back of with were those amount in increasing the reason margin throughout expectations December So

by, an we So that's from XXX missed to why mark basis our what, perspective. the - missed estimate points XX

So you than don't that math, you more at like, some specific I any but if to give can that, this want point. around do

Justin Speer

Got the you it. the run it. dynamic I improve what more the it that improvement And PCS rated expectations business, this see you've because thinking Got or then to kind pressure I Is led to going of other guess the was you're into there? did ahead is comps of quarter?

Scott Culbreth

Yeah.

comps. to starting lap the we're So tough

So obviously to and teams going going out that's business. a job be but winning nice a have our factor, done

that mentioned We've I more quarter stale think gotten portfolio. relevant we introducing I in last well, are as styles.

we us colors will help we forward. some that frame. introduction as round the time another bucket, the So launch February here next which of We've launched go September in product of August, will in be well got as new

relevance. combination team and of So easier really product sales driving growth a it's comps,

Justin Speer

and this mid-teens married And -- that's for can it's seeing what fiscal inflation, about you with is do And Do get of we're think with call a that that kind next that broadly, you achievable the given this think incredible I just strength or as top you line tougher lastly the up? feel do we coming where your that think big seeing inflation? are year to you're picture, about growth in they you of guess, me, margin how environment kind targets? it's midterm

Scott Culbreth

Yeah.

actually our is the I this the point -- budgetary of inflation. in in middle call we're we're cycle. in At a tougher with it think time,

is out. fiscal closure growth our how be dependent question do really what in sales year costs to that and strong. So it the April next February perspective frame The that. power to on shake call ultimately the we'll with profile you around and time input upon is these margin see back all we going pricing throughout is 'XX early of Obviously, against going be give

So That's think in that Obviously, but going still we're that going target striving been achieve. being drive next to be for the what a capture forward jump still and this with strong I our sales share environment, big That's is has challenging, do to long-term it we're part a to year? such target. us. to of story environment,

we as make So much that of costs. as that bit to sure little we a can. we we've got capture want more escalating But pricing, now be knowing let's around disciplined material

Justin Speer

Really guys. you, Thank appreciate.

Operator

Our a be [Operator from with will follow-up Instructions] Wojs next question Tim Baird.

Tim Wojs

guys Thanks, extra Hey. question. for the

sounds it to overall of then you're some Just going sheet. I of two lower you guess about buyback, when targets, refinance secondly, we take see just in And the balance the be maturities? is here, maybe the going about out? terms potential restart is looking rate? dilution opportunity I are of, Is it think to there kind and extending it curious there just you an are an kind at guess, to opportunity think to offsetting of of I'm that. kind guys things like the just as what you count the where share should on to or

Scott Culbreth

Yeah.

rates what kind we're are that around are first. that we're I'll answer one is there and of Tim, And and debt that really of evaluated positions all historical our today seeing those So out return goal the those really, advantage our doing low out the is we is kind main that first our take to rates, maximize the - there, and back shareholders. interest of some of benefit to currently, costs our reduce

our really priority. is that So

look that. The we We're look we give we're to repurchase going want we'll total is an perspective. explore anti-dilutive still be accretive definitely evaluating structure, color be that the through will quarter fourth from go we're and a to do there's what going more against at through to As we right far share as opportunity more going and that that now, come there. we're it's we there, guidance throughout through as definitely If is and anything that. doing deal too, that now, more to future process like, you as to go the what

Tim Wojs

Okay.

Okay. And one then last sneak one. I'll

for the I that's centers mean, is to Just renewed a made-to-order how you just the the trending over kind look traffic focus of kind in of last terms couple into home like of been centers, do the think there business there the Just within the made-to-order year a you or how industry over of that tougher next know or year the - home about two? X I of any years, over by drive platform period? think what can would made-to-order channel conceptually

Scott Culbreth

millennials time. and We've home the some comp and issues they've the those opportunity particular seen because question over I can ours. goals I categories, reporting population environment. as more I their had home including last modified centers grow think that category. to is for both go there's we to centers, that's thinking was wouldn't last we'll them, thesis years forward. probably were couple home the at improvement the followed the it's over so in going and sure hang business to targets next we keep growth of largest elsewhere footprint coming in we level the over the to growth the probably in out got vaccinated, results push that, struggle quarters got Depot the wildcard forward the making work restrictions certainly over together they've model. years. Yeah, keep and drive we past XX think what flock believe outstanding three go is of years What to that how exactly in retailers, we Lowe's, There consumers category new buying the comp you of and around those on that multiple with and tough they months of set earnings to continue is, to the with this when the some I still days, a our release that if point or ones Clearly, their many our last will mark for this that need into as few now home of to think we've get many we wise. be they shop And that obviously, all at get on an to shop they're consumers in We we COVID stores. going consumers Can as as they in

Tim Wojs

Okay.

Appreciate Thanks, helpful. that’s guys Okay, the color.

Operator

with Zelman is a follow-up & question next Justin Speer from Our Associates.

Justin Speer

flow in guys. you cash payables, the at just the looking the I free thinking I'm together wanted them for are free know to on conversion? one What sneak bucket you side, kind of I just release accruals, cash some what in more that good think was of because I the we should contribution? about been it's the tailwind the a far And here, but payables thus in least at how pretty with think year? And the

Scott Culbreth

Yeah.

for our position cash kind that we at with reemphasizes looking about be did We free of still at a this inventories repurchase be regards strong, that well. out expect flows, reiterates and our of share debt increase strong of downs year they even you're us. there Justin, rate actions relatively In as pay to the the will payables, comparable payables the to and kind the too. kind that's in that, seeing our

had there. just timing AR It and quarter. collectability. the offset around So say not the within But receivables that received the quarter it's really you're concerns we our the that was balances, of customer and is payments where our this seeing around were I'd challenges in

but little QX. would bit expect say, showed So in QX, of, to we performance up I pick we'll that a in degradation

Justin Speer

I Thanks, it. Excellent. guys. appreciate

Scott Culbreth

Yeah, Thank you.

Operator

closing for anyone question, the over Mr. else remarks. like As to any ask turn waiting Joachimczyk I a do I'd to see not line to

Paul Joachimczyk

second, to participate. for Thank One concludes are Since time all you you. additional no this taking our thank questions, there the call.

Operator

for The conference has presentation. concluded. Thank you today's attending

disconnect. may You now

American Woodmark (AMWD) 27 Feb 212021 Q3 Earnings call transcript